What happens after chapter 13 is dismissed?

Personal bankruptcy is a legal process which allows individuals to deal with their debts. For instance, Chapter 13 requires people to pay unsecured and secured creditors over 36 to 60 months. Chapter 7, however, allows individuals to get rid of their unsecured debts without paying creditors. Typically Chapter 7 lasts four to six months before debts are wiped out.

Unfortunately, personal bankruptcy doesn’t always go as planned. Instead Chapter 7 or 13 being successful discharged, cases can be dismissed. When bankruptcy cases are dismissed creditors can continue their debt collection activities because the automatic stay is lifted. The stay starts immediately and prevents creditors from attempting or continuing any foreclosures, wage garnishments or lawsuits. Let’s say an individual files Chapter 13 to save their home. Once the automatic stay is lifted the mortgage lender can take their home by completing the foreclosure process.

Wage garnishments also start after Chapter 13 is dismissed. This means that if the creditors only threatened to deduct money from people’s paychecks, they can now start the process. Also, creditors can start calling or contacting people demanding payment.

Therefore, it’s important to contact a bankruptcy trustee whenever a Chapter 13 payment or series of payments are missed. Before any Chapter 13 cases are dismissed, the lawyer can do something to help. For instance, the bankruptcy lawyer can either petition for a modification, hardship discharge or request to convert the Chapter 13 into a Chapter 7.